Income Tax Query

TDS on Property Transactions (Section 194-IA)  

Objective: This section is inserted vide the Finance Act, 2013 with effect from 1.6.2013, with a view to expanding the TDS provisions on transfer of certain immovable properties other than agricultural land. 


Immovable Properties meaning: Immovable property means any land (other than agricultural land) or any building or part of a building. 


Agricultural Land meaning: Agricultural Land means agricultural land in India except the following as defined under section 2(14)(iii): 

a.     Land within municipal jurisdiction having population not less than 10,000 is excluded from the definition of agricultural land. Municipal jurisdiction can be known as municipality, municipal corporation, notified area committee, town area committee, town committee or a cantonment board. 

b.     Any area within the specified distance from the municipal jurisdiction as specified above is also excluded from agricultural land: 

Population according to the last preceding census 

Distance from municipal limits, measured aerially 

Population more than 10,000 but not exceeding 1 Lakh. 

Not more than two kilometres 

More than 1 Lakh but not exceeding 10 Lakh 

Not more than six kilometres 

More than 10 Lakh 

Not more than eight kilometres 


Person responsible for deduction: Any person, being a transferee, responsible for paying any sum by way of consideration for transfer of any immovable property (other than agricultural land) 


Time of deduction: At the time of credit of such sum to the account of the transferor or at the time of payment in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. 


Basic Exemption: No TDS is to be made where the consideration for transfer of an immovable property is less than Rs.50 Lakh. 


Definition of “Consideration”: Apart from value of property, “consideration” includes all charges of the nature of: 

Ø  Club membership fee 

Ø  Car parking fee 

Ø  Electricity or water facility fee 

Ø  Maintenance fee 

Ø  Advance fee or 

Any other charges of similar nature, which are incidental to transfer of immovable property 


Rate of Tax Deduction: The purchaser has to deduct tax @1% on the consideration paid or payable on the transfer of the immovable property. (0.75% from 14.05.2020 to 31.03.2021) 


Some issues: 

Ø  The basic exemption is on the purchase price paid or payable, not the stamp duty value. Hence, in case purchase price is Rs.45 Lakh and stamp duty is paid on Rs.60 Lakh, no need to deduct tax. However, for the difference between purchase price and stamp duty value, other repercussions under the Income Tax Act will follow like treating the difference as income of the buyer and taking the same as full value of consideration in the hands of the seller. 

Ø  Even amounts paid in instalments, if total price for the immovable property exceeds Rs.50 Lakh, TDS is compulsory. 

Ø  In case there are “n” number of transactions for “n” number of immovable properties each below Rs.50 lakh but aggregate more than Rs.50 Lakh, there is no need for TDS as the basic exemption is applicable amount paid/payable on each individual immovable property. 

Ø  TDS is to be made even on payments to builder whether paid in instalments or paid in lumpsum if consideration is not less than Rs.50 Lakh. 

Ø  Even if the buyer is a property dealer, dealing in purchase and sale of immovable property in the regular course of business, TDS has to be made. 

Ø  In case PAN of the seller is not submitted, TDS will be @20%. 

Ø  Person responsible for deduction of tax at source not to obtain tax deduction or collection account number.